Question

If a company fails to receive minimum subscription within 120 days from the date of issue of the prospectus, in how many days should company refund the amount of application money from the date of issue of prospectus?

• A. 150 days
• B. 230 days
• C. 130 days
• D. 120 days

Hint:

Minimum subscription rule is a direct MCQ trap: 120 days = collection period, 130 days = refund deadline.

Answer 1

The Correct Option is C

Concept: A company issuing shares to the public must receive a minimum subscription as per the Companies Act, 2013. Minimum subscription refers to the minimum amount required for the company to commence allotment of shares. If this condition is not satisfied within the prescribed time limit, the company cannot proceed with allotment and must refund the application money to investors. The law ensures investor protection by imposing strict timelines for refund.

Step 1: Understanding minimum subscription requirement.
A public company must receive minimum subscription within: \[ 120 \text{ days from issue of prospectus} \] If this condition is not satisfied: \[ \text{Company cannot allot shares} \]

Step 2: Legal consequence of failure.
If minimum subscription is not received within the stipulated time:
• Application money becomes refundable
• Company must return full amount to applicants
• No allotment can be made

Step 3: Time limit for refund.
As per provisions, refund must be completed within: \[ 130 \text{ days from date of issue of prospectus} \] This includes: \[ 120 \text{ days waiting period + refund processing time} \] Final Answer: 130 days